Does your company have a plan in place to use data effectively while also keeping it secure?
Data is generating at an ever-increasing pace ̶ up 650 percent between 2012 and 2017, according to CSC – and there’s no sign of slowing down in sight. Two factors driving this explosion are digital replacing analog technology and the creation of data by individuals and companies. But are we reaching the point where more information makes us less effective?
How do companies tame big data to use it effectively?
Let me begin to answer that question by pointing to a couple of examples of companies that use easily-acquired types of data – demographic and transactional ̶ in simple, but effective, ways. My first example is AARP’s use of birth dates. I think back to when AARP sent me a card in the mail as my 50th birthday approached. Like most, I hated the reminder of my mid-century mark, but, I have to admit, AARP’s membership drive represents a great example of how to use one simple piece of data to capitalize on a key life event.
There are also simple ways to leverage transactional data effectively. For example, Kohl’s – based in Wisconsin – emails shoppers thank-you notes from the store manager within an hour of their purchases at its store in Menomonee Falls, Wisconsin. When I read my note, I felt valued as a customer. This simple gesture demonstrates how big retailers can still offer a customized experience to consumers. It also reminds me that personalization continues to shift from face-to-face interactions to digital communications.
More complex, but becoming standard among big retailers, is the use of transaction data to predict what consumers will buy next. For example, if a customer buys a baby monitor, the retailer can usually count on additional sales of baby related-items to follow.
How can issuers maximize the return on data and minimizing risk?
Card issuers face two key challenges related to data. First, how do you maximize its use? Processors are able to provide an enormous amount of data, but it’s up to issuers to make that data actionable for optimizing sales opportunities and enhancing the customer experience.
Second, how do you protect your data and ensure consumer rights? Those of us who maintain data files have a massive responsibility to protect people’s information.
These are the six steps that I recommend taking to monetize data effectively and protect it:
- Set overall goals: First, define what your company wants to accomplish with data and then articulate what information you need to support your goals. Setting specific goals helps companies to be more purposeful about the data they collect and maintain.
- Understand the data assets that your company possesses: Take inventory of available data, understand what drives the key metrics of your business performance, and identify gaps between the data you possess and the data you need to achieve your goals.
- Define a strategy for monetizing data assets.
- Determine what security measures must be in place to protect the data you collect, as well as the data you receive from your processor. Ask yourself:
- Do you have the same security protections in place as those banks are required to extend to their customers?
- Do you absolutely need access to customers’ card numbers? If you choose to keep card information in your database, you’ve signed up for an additional level of regulatory responsibility in terms of how you must protect the data.
- After you take receipt of data files, do you protect it in the same manner and under the same laws as the FinTech company that provided you with that information?
- When assessing your risk, do you consider how much a loss or compromise of the information would affect your business, in addition to weighing the regulatory risk associated with data compromise?
- Is your company large enough to assume the responsibilities of security associated with maintaining a database in-house? If not, have you considered the alternative of using your processor to conduct analyses for you? Your processor can deliver files on cardholders according to specifications – e.g., made purchases at particular merchants or have certain demographic profiles.
- Prepare to make investments in tools and talent to initially slice and dice the data and determine if gaps exist. Also, prepare to make significant investments in people who are capable of interpreting the data, determining how to apply it to your business, executing programs and measuring effectiveness.
- Look to your processor for advice on options that are available and most appropriate for your firm.